Leicestershire-based IFA Willow Financial Management has been forced into administration after facing £1.5m in Arch cru liabilities, with former directors setting up a new firm and claims likely to fall on the Financial Services Compensation Scheme.
Willow entered discussions with administrators in July after assessing its Arch cru sales and concluding it would be exposed to significant claims from investors, according to a recent statement of administrator’s proposals.
The firm was then bought in a transfer of undertakings protection of employment arrangement by two separate firms set up by its former directors for a total of £40,000. The administrators say the pre-packaged sale ensured the majority of the firm’s staff remained employed.
The statement says Willow Financial had been ordered to pay £70,000 in Arch cru compensation to two former clients who had taken their case to the Financial Ombudsman Service. It expected to receive a “significant” number of further claims, which it did not have sufficient reserves to meet.
The administrators anticipate there will be sufficient funds to discharge preferential creditor claims in full.
The Financial Services Compensation Scheme usually ranks as an unsecured creditor. The administrators say a dividend of approximately 0.7 pence in the pound will be paid to unsecured creditors – but that this is dependent upon future realisations in respect of trail receipts and the level of claims.
Willow’s total liability to creditors stands at £1.59m.
Willow directors were unavailable for comment as Money Marketing went to press.